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Binance faces serious allegations in SEC legal battle

TL;DR

  • The U.S. Securities and Exchange Commission (SEC) alleges that Binance and its former CEO, Changpeng Zhao, deliberately attempted to evade U.S. laws, as indicated by their recent $4.3 billion settlement with the Department of Justice.
  • Binance admitted to bypassing U.S. regulations to attract American users, weakening its defense against SEC’s claims of jurisdictional overreach and securities law violations.

Binance, the world’s largest crypto exchange, and its former CEO, Changpeng Zhao, are embroiled in a legal tussle with the U.S. Securities and Exchange Commission (SEC). The SEC’s latest court filings suggest that Binance and Zhao attempted to deliberately sidestep U.S. laws. This accusation comes after a $4.3 billion settlement with the Department of Justice (DOJ), where both parties entered plea deals. The SEC asserts that these plea deals contradict Binance’s previous defense concerning extraterritorial jurisdiction.

Binance’s legal strategy and DOJ settlement

Binance’s legal strategy has been under scrutiny since September, when it moved to dismiss the SEC case. The crypto exchange argued that the SEC was manipulating securities laws to encompass the crypto domain and trying to extend its jurisdiction through litigation. However, as part of its settlement with the DOJ, Binance admitted non-compliance with U.S. laws to retain and attract users in the country. This admission weakens its position against the SEC’s charges.

Moreover, the SEC highlighted Binance’s use of a U.S.-based technology service provider and transactions amounting to approximately $1.2 billion by Merit Peak, a market maker owned by Zhao. These operations further entangle Binance in the U.S. regulatory web, challenging the exchange’s earlier jurisdictional arguments.

Impact on Zhao

Changpeng Zhao, who stepped down as CEO following the plea deal, now faces a sentencing hearing scheduled for next year. The SEC’s filing points to Zhao’s pursuit of company benefits while neglecting legal obligations, such as implementing an effective anti-money laundering program. These actions, according to the SEC, were directly aimed at the U.S. market, thereby justifying the court’s jurisdiction over him.

The SEC initially targeted Binance and Zhao in June, alleging violations of securities laws, mismanagement of customer funds, and failure to register under the Exchange Act. These allegations mark a pivotal moment in the ongoing debate over cryptocurrency regulation and enforcing existing financial laws in the digital asset space.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Damilola Lawrence

Damilola is a crypto enthusiast, content writer, and journalist. When he is not writing, he spends most of his time reading and keeping tabs on exciting projects in the blockchain space. He also studies the ramifications of Web3 and blockchain development to have a stake in the future economy.

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